Why Phases are the Key to Project Performance Evaluation Douglas C. Bower,

Transcription

Why Phases are the Key to
Project Performance Evaluation
Douglas C. Bower, MBA, MSc, PMP
Greater Toronto ISLIG – May 17, 2007
Agenda
Objectives
Review of Earned Value Management
Issues with Conventional EVM
Phase Earned Value Analysis concept
Using PEVA in sample project
Applying PEVA to portfolio analysis
Conclusions
Greater Toronto ISLIG
May 17, 2007
© Douglas Bower 2007
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Objectives
Introduce and describe a new PM concept
Phase Earned Value Analysis (PEVA)
My proposed extension to Earned Value
Management (EVM) theory and methodology
Uses project phases to facilitate EVM concepts
Demonstrate how PEVA can provide
Simplified calculation of earned value measures
Meaningful identification of schedule variance
Improved visual presentation of status and trends
Evaluation of projects and programs in portfolios
May 17, 2007
3
EVM Defined
Earned Value Management (EVM) is a
method for integrating scope, schedule,
and resources… and for measuring
project performance.
It compares the amount of work that was
planned with what was actually earned with
what was actually spent to determine if cost
and schedule performance are as planned.
– PMBOK 3rd Edition
May 17, 2007
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Planned Value (PV)
What did we plan to achieve by now?
Planned Value (PV) is the authorized budget
assigned to the scheduled work to be
accomplished…
Includes both direct and indirect costs
Includes contingency amounts in the budget
Includes part of budget for activities in progress
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Earned Value (EV)
What have we achieved so far?
Earned Value (EV) is the value of completed
work expressed in terms of the approved budget
assigned to that work…
Includes estimated EV for partly completed activities
Cumulative Earned Value is the total of all EV
amounts for all project activities completed to date
May 17, 2007
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Actual Cost (AC)
What have we spent so far?
Actual Cost (AC) is the total costs actually
incurred and recorded in accomplishing work
performed during a given time period…
Can include both direct and indirect costs
Cumulative Actual Cost is the total of all AC
amounts for all project activities completed to date.
May 17, 2007
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EVM Cost Variance and
Cost Performance Index
Cost Variance (CV): What is the difference
between what we have achieved and spent?
Cost Variance = Earned value – Actual cost
CV = EV – AC
Negative CV is the $ value that performance lags behind costs
Cost Performance Index (CPI): What is the
ratio of our performance to our costs?
CPI = EV / AC
CPI gives performance as a ratio of actual costs to date
May 17, 2007
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EVM Schedule Variance and Schedule
Performance Index
Schedule Variance (SV): What is the difference
between what we have achieved and what we
should have achieved by now?
Schedule Variance = Earned Value – Planned Value
SV = EV – PV
Negative SV is the $ value that performance is behind plan
Schedule Performance Index (SPI): What is
the ratio of our performance to our plan?
SPI = EV / PV
SPI gives performance as a ratio of the budget to date
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Forecasting final results
Management wants to know:
How will it all end?
Final results determined by
quality of the project plan
actual performance results
management’s desire to affect results
Forecasting variables
value of the work remaining
performance efficiency factor
total actual costs to date
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Forecasting final cost results:
Estimate at Completion
1. Actuals to date plus an new estimate
•
•
Assumes all of the original estimating was seriously flawed
Take your costs to date, then add a new estimate for the
remaining work
• This is known as a “Management EAC”
EAC = Actual Costs + Estimate to Complete
2. Actuals to date plus remaining budget
• Assumes current cost variances are atypical
• Take costs to date, add the budget for the remaining work
EAC = Actual Costs + (Total Budget - Earned Value)
EAC = AC + BAC - EV
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Forecasting final cost results:
3. Cumulative CPI Estimate at Completion
•
•
Most commonly used approach for EAC
Take your remaining work, divide it by your cost efficiency
to date, then add your costs to date
EAC = Actual Costs + (Total Budget - Earned Value)
Cumulative CPI
Cumulative CPI EAC Simplified
• Above formula can be simplified (through algebra) to get:
EAC = Total Budget / Cumulative CPI
EAC = BAC / CPI
•
Divide your total budget (BAC) by cost efficiency to date
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Predicting a Project’s Time Duration
Critical path on current schedule is best
indicator of completion date
Schedule Variance (SV) indicates the
progress of the work compared to plan
SPI gives the ratio of achievement compared
to plan, but
Conventional SV and SPI are invalid in the
last third of the project (more on that later)
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Issues with Standard EVM
1.Cost/time integration challenge
Requires a single WBS to organise both the
schedule and budget
2.Progress evaluation challenges
Schedule variance expressed in dollars
Variance indicators become useless in 2nd half
Doesn’t deal with milestones
3.Forecasting challenge
EVM can’t forecast future trend lines for costs
and achievements
May 17, 2007
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EVM Cost/time Integration Challenge
External
Constraints
Schedule
Target
Milestones
WBS
Available
Resources
Planned
Stages
Activity
Sequences
Phased
Rollout
Some
SomeSchedule
Schedule
Items
ItemsNot
Notin
inWBS?
WBS?
Budget
Budget
Planned
Procurement
Internal Division
of Work
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Some
SomeWBS
WBSItems
Items
Not
Notin
inBudget?
Budget?
Standard
Industry
Breakdowns
Cost
Estimate
Corporate Cost
Control Formats
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Project Value and Cost Æ
EVM Progress Evaluation Challenge:
Schedule Variance in Dollars
B
PM
Date of
Measurement
Missing:
Schedule
Variance
in Days
A
al
u
t
c
ed
n
an
l
P
st
Co
rne
Ea
e
lu
a
V
e
alu
V
d
CV
SV
Cost
Variance in
Dollars
Schedule
Variance in
Dollars
Time Schedule Æ
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EVM Time Performance Challenge:
Schedule Progress Anomaly
EVM progress indicators (SV and SPI) may
become meaningless during last half of project
Why? Because both compare EV with PV
As every project (or phase) nears completion, the
Earned Value must approach the Planned Value
So, even if the project is months or years late…
• SV must approach zero (no time variance?)
• SPI must approach 1.0 (on schedule?)
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Issues When EVM is Applied to
Phase Milestones
B
M
P
Budget
Baseline
What
Whatwill
willActual
Actual
Cost
be
when
Cost be when
Phase
Phase33finishes?
finishes?
Planned Value for
End of Phase 3
e
lu
a
V
ed
st
n
o
e
n
lC
la alu
a
P
u
V
t
ed
Ac
n
r
Ea
Phase 3
Planned
Completion
Date
Earned Value is
Lagging - Phase 3
is incomplete
Time Schedule Æ
May 17, 2007
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Challenge: Using EVM to Plot
Future EV and AC Curves
What
Whatcurve
curverepresents
represents
future
cumulative
future cumulative
Actual
ActualCosts?
Costs?
?
?
B
PM
Budget
Baseline
What
Whatcurve
curverepresents
represents
future
cumulative
future cumulative
Earned
EarnedValue?
Value?
e
lu
a
V
ed
st
n
o
e
n
lC
la alu
a
P
u
V
t
ed
Ac
n
r
Ea
Current
Date
Time Schedule Æ
May 17, 2007
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The PEVA Concept
1. Recognizes structured project phases
2. Allows separate time and cost baselines
3. Simplifies planned and earned value
4. Simplifies actual cost calculations
5. Compares planned and actual milestones
6. Forecasts future milestone dates and
cumulative costs at those points
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1. PEVA recognizes
structured project phases
Structured phases are EVM allows
a key mechanism for
the control of the
scope, time and cost
dimensions
Logical project
divisions
Phase end is a
vantage point
Time for stage gates,
phase review, etc.
May 17, 2007
performance
evaluation at phase
end, but… fails to
isolate a phase from
the balance of the
project
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2. PEVA allows separate
time and cost baselines
Cost and time
EVM requires:
baselines are
prepared separately
Requirements for
both budget and
schedule:
Address all of the work
of the project
Adopt phases as the
primary divisions
May 17, 2007
Common single WBS,
for both schedule and
budget
Control accounts,
each with identified
costs, time frame and
responsible groups
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3. PEVA simplifies planned value and
earned value calculations
PEVA establishes the EVM requires
Phase Planned Value
by summing the
budgets for all work in
that phase
mangers to calculate
or estimate the PV
and EV of all activities
in progress
Phase EV is equal to
Phase PV when that
phase is completed
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4. PEVA simplifies cost calculations
PEVA calculates the
Phase Actual Cost by
adding expenditures
and/or staff time for
any work completed
for that phase
Just need identify the
right budget category
within a phase
May 17, 2007
EVM requires
complex calculations
for cost of work in
progress
Managers need timesheet codes and staff
hours for each work
package
Need to attribute each
cost to a specific
package
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5. PEVA compares planned
with actual milestones
PEVA compares the
planned completion
date for each phase
with the actual
completion date
EVM cannot
recognise phase
completion or other
milestones
PV is baselined with
each planned phase
completion date, and
EV and AC are
tracked with each
actual phase
completion date.
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6. Forecasts future milestone dates and
cumulative costs at those points
PEVA Forecasting
Cost: PEVA uses the
efficiency to date (CPI)
to forecast the
expected cost of all
future phases
Time: PEVA uses the
rate of progress, called
SPI(t), to forecast the
end date of each
future phase
May 17, 2007
EVM Forecasting
Cost: EVM uses the
efficiency to date
(cumulative CPI) to
forecast the estimate
at completion (EAC)
Time: EVM cannot
reliably forecast the
project end date
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Introducing the PEVA Symbols
PEVA tracks performance only at phase end
Or at the end of a sub-phase
Distinct symbols are used for charting PEVA at
the end of each phase:
Phase
Planned
Value
May 17, 2007
Phase
Earned
Value
Phase
Actual
Cost
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Phase Earned Value Analysis Concept
Phase
5
Phase Planned Value
Phase
4
Budget
Baseline
Phase Actual Cost
Actual Time and Cost Status
at Phase 3 Completion
Phase
3
Planned Time and Cost
Status at Phase 3 Completion
Actual Cost of Phases 1-3
Over budget
Total Budget for Phases 1-3
Phase
2
Phase
1
Budget at
Completion
Late
Phase Earned Value
Phase
6
Time Schedule Æ
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PEVA Symbol Relationships
PEVA symbols identify the accumulated

Phase Planned Value, Phase Earned
Value and Phase Actual Cost
At the end of every phase:
Earned Value will equal the Planned Value,
and
Actual Cost will be calculated on the same
date that the Earned Value was achieved
One of nine basic PEVA relationships
can occur at the end of each phase…
May 17, 2007
Phase
Actual
Cost
c
t
Phase
Planned
Value
Phase
Earned
Value
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Nine Possible PEVA Conditions
Under Budget
On Budget
Over Budget
Early Completion
1
1
On Time Completion
Over
Budget
Earned
Value
Actual
Cost
2
Actual
Cost
Planned
Value
On
Time
Over
Budget
Planned
Value
Earned
Value
Late Completion
3
Over
budget
Planned
Value
Early
5
On
Budget
Actual
7
Actual
Cost
On
Time
Earned
Value
6
8
Early
Cost
Planned
Value
Earned
Value
Under
Budget
Under
Budget
© Douglas
Earned
Value
Late
On Time
Planned
Value
On
Budget Actual
Planned
Value
Actual
Cost
Early
May 17, 2007
On
Budget
Planned
Value
Planned
Value
Earned
Value
Earned
Value
Late
4
Cost
Earned
Value
Actual
Cost
Actual
BowerCost
2007
9
Planned
Value
Late
Earned
Value
Under
Budget
Actual
Cost
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Typical Project Activity Grouped by Phases
Assessment
Budget
Concept
Develop
Milestone 1
1
Engineering
Finalisation
Gather info
Hire staff
2
Milestone 2
Investigation
Justification
Knowledge
Long-term
3
Milestone 3
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EVM: Assessing Project Activity - End of August
Assessment
Budget
Concept
Develop
1
Milestone 1
Engineering
Finalisation
Gather info
Hire staff
Milestone 2
Actual Time and Cost
Status at August 31
2
Investigation
Justification
Knowledge
Long-term
3
Milestone 3
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PEVA: Assessing Project Activity - End of Phase 2
Assessment
Budget
Concept
Develop
1
Milestone 1
Engineering
Finalisation
Gather info
Hire staff
Milestone 2
Investigation
Actual Time and Cost
Status at Phase 2
Completion
2
Justification
Knowledge
Long-term
Milestone 3
May 17, 2007
Progress on Phase 3
work is not included
3
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PEVA Components
1.
Project Schedule

2.
PEVA Cost Table

3.
Project budget in spreadsheet
PEVA Cumulative Performance Forecast

4.
Gantt chart in PM software
Phase time/cost status and forecast in spreadsheet
PEVA Chart

Earned value tracking and forecast diagram
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PEVA Cost Measures and Indicators
Phase Planned Value is the total budget for each phase
Phase Earned Value is equal to the Planned Value for

each phase – when completed.
Phase Actual Cost is the total of all internal and
external costs attributed to each phase.
Phase Cost Variance: CVP = EVP – ACP
Phase Cost Performance Index: CPIP = EVP/ACP
Cumulative Cost Variance is total EVP less total ACP,

at each successive phase end.
Cumulative CPI is the total EVP divided by total ACP, at
each successive phase end.
May 17, 2007
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PEVA Time Measures and Indicators
Phase Schedule Variance is the difference between the

planned and actual completion dates for a phase.
SVP = Planned phase end date – Actual phase end date
Schedule Performance Index is planned duration divided
by actual duration to a phase end.
SPIP = Planned duration / Actual duration
Duration is elapsed time from project start to any phase end
Phase Completion
Planned Duration
Actual Duration
Project
Start
May 17, 2007
<t>
Planned Actual
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PEVA Sample Project
Following project is purposely simple
• Less detail to allow concept presentation within
timeframe and on this screen
Demonstration spreadsheet model
contains a PEVA table and a PEVA chart
• This Excel spreadsheet is available on request
Not necessary to show project schedule
• Let’s assume there is one…
May 17, 2007
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PEVA Sample Project
Data
DataEntered
Enteredby
by
Project
Manager
Project Manager
Results
ResultsCalculated
Calculated
Automatically
Automatically
Earned Value Variances and
Indices by Phase
Forecast
Phase
End
May 17, 2007
Cumulative
PV and EV
Forecast
Cum.
AC
Forecast Earned Value
Variances and Indices by
Phase
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Estimate At
Completion
Last
Completed
Phase
To
ToDate
Date
Forecast
Forecast
Cumulative
Actual Cost
May 17, 2007
Forecast
End Date
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Implementing PEVA
1.
2.
3.
4.
5.
6.
7.
8.
Prepare time schedule by phases
Prepare budget by cost elements
Group budget elements by phase
Confirm activities and identify planned
phase completion date
Deal with approved changes
Calculate actual costs
Track phase progress and completion
Review variances and take action
May 17, 2007
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PEVA and Project Portfolio
Management
Project Portfolio Management
Corporate governance
Strategy to address corporate mission
Tactics to implement goals and objectives
Knowledge and control of corporate initiatives
Governance of programs, projects and portfolios
Assessing projects and programs before, during and
after delivery
Authorizing and launching new projects
Revising or canceling unsatisfactory projects
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Portfolio Management Considerations
Resources: required vs. availability
Relevance: deliverables vs. objectives
Dependency: project in relation to others
Progress: meeting project schedule
Project planned vs. actual time
Performance: meeting project budget
Project planned vs. actual costs
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PEVA and Project Portfolio
Management
Evaluating project performance and
progress by phases aids in portfolio
management
Phase and Earned Value:
EVM does not isolate phase milestones, cost
performance and schedule progress
PEVA permits and encourages project
assessment at each phase gate
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PEVA-Portfolio Assesses
Performance and Progress
Performance
Progress
How are we doing?
How are we doing?
Earned value vs. actual
cost to the end of the last
completed phase
Where are we going?
Budget at Completion
vs.
May 17, 2007
Planned vs. actual
duration to the end of the
last completed phase
Where are we going?
Planned Total Duration
vs.
Forecast Total Duration
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PEVA and Portfolio Management
Cost Performance
Budget
Budget &
Planned
Results
Schedule Progress
Value (EV) to
Last Completed
Phase
Planned
Duration (PD) to
Last Completed
Phase
6
Planned
Total
Duration
6
Alpha
Project
$
Actual
Costs
and New
Cost
Forecast
New Cost
Forecast
(EAC)
May 17, 2007
Actual Cost
(AC) to Last
Completed
Phase
Schedule &
Planned
Duration
t
Actual
Duration (AD)
to Last
Completed
Phase
Forecast
Total
Duration
Actual
Duration
and New
Time
Forecast
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Cost Performance ($)
Schedule Progress (t)
Alpha
Project
Budget &
Forecast
Cost
Beta
Project
Planned &
Forecast
Completion
Gamma
Project
Delta
Project
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Graphical presentation provides visual
indication of status of individual projects
Indicates relative size and duration
Shows degree of progress and performance
Permits side-by-side comparison of all
current projects
Depicts related projects within a program
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Conclusions
EVM has been effective where fully applied, but
Standard EVM methodology has numerous issues
Phase Earned Value Analysis can simplify the
adoption of performance management
PEVA also provides features not found in EVM
PEVA requires application in a range of projects
Demonstrate its use and identify improvements
PEVA facilitates review of a project portfolio
Provides graphical image of project status & forecast
May 17, 2007
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Thank You!
Further questions?
Douglas.Bower@Ontario.ca
Office: (416) 326-9604